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What is XM360?
It lets you see your content, and manage it, content that it is aware of is:
XBLA, DLC, Title Updates, and Game Saves.
It allows you to unlock XBLA and DLC.
It allows you to sort XBLA by title, release date, rating, etc.
It allows you to launch XBLA titles
It allows you to "backup" TUs to a separate directory that isn't subject to wiping by the 360.
It allows you to delete content.
It will produce "reports" of what content you have and what you are "missing."
It is an ftp server.
It will sync the time on your 360 from the internet.
It will show you various temperatures of your 360.
It knows how to connect to other 360s running xm360 to transfer content between them.
It knows how to connect to a PC running xm360 to transfer content between the PC and the 360.
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